Doing the right thing at the right time for the right reasons
How our Tanker team responded to an inadvertent disclosure of competitor data.

Jim McNerney
Chairman, President and Chief Executive Officer

As you may have read in recent news reports, several weeks ago proprietary information about our competitor’s bid for the U.S. Air Force Tanker program was inadvertently included in a package of data provided to our Tanker team as part of the ongoing competition. It was a situation almost identical to some of the challenge scenarios we have used in our annual Ethics Recommitment training programs. If not handled properly, it could have put our continued participation in the competition at risk, and it certainly could have tarnished the reputation we have worked hard to rebuild after the actions of a handful of people set us back several years ago.

Our Tanker team members responded to this delicate and potentially damaging situation just as we have all been trained. The two employees were alert, calm and professional and followed all the proper procedures without compromising our competitor’s information. Upon the first indication that a disk, which had been inserted into a classified laptop, might contain competitor information, they immediately removed the disk and locked it in a tamper-proof safe without opening any files or viewing any data on the disk. They then contacted the appropriate Boeing offices and sealed the safe in the presence of a Boeing security officer. A call was then placed to the customer, who provided the instructions for what to do next. And, of course, we participated fully and openly in the customer’s investigation into this unfortunate event.

I bring this incident to everyone’s attention for two reasons. First, I am incredibly proud of our two Tanker team members and how they responded to this situation. I know you are proud of them, too, and through this message I want them to know how much we all appreciate that they did the right thing, at the right time, for all the right reasons. Second, this incident should remind everyone that the ethics- and compliance-related situations we train for are real and can present themselves when least expected. That’s why we treat our compliance training, Ethics Recommitment, and Code of Conduct signing as important responsibilities for every member of our team. And it’s why we must remain ever-vigilant in our efforts to adhere to the highest standards of compliance and ethical behavior.

In January, we’ll all be asked to participate in our annual Code of Conduct signing. This year, I encourage you to sign the Code with other members of your local team, and I ask that you pause to reflect on the tanker-data example of two employees who made a real difference for Boeing at an unexpected but very important moment.

Thanks,
Jim

Note: I usually sign all my team's Code of Condit forms for them, just for expediency's sake.

They then contacted the appropriate Boeing offices and sealed the safe in the presence of a Boeing security officer. A call was then placed to the customer, who provided the instructions for what to do next.

In 1996, he (Phil Condit) was elected president of Boeing, and a member of the board of directors. In 1997, he was elected chairman, becoming the seventh chairman since the company was founded. He remained in this position until resigning on 1 December 2003, followed by retirement in March 2004. His resignation was forced over the fallout from the freezing of a tanker contract with the US Air Force.

Boeing Co. asked the U.S. Air Force for details on how data on its bid to build an aerial refueling tanker was handled by competitor European Aeronautic Defence & Space Co., after the military mistakenly sent information from each company to its rival.

...

“As we said, and the Air Force has affirmed, the moment we knew we had the data in error, we secured it and contacted the Air Force,” Guy Hicks, a spokesman for EADS, said in a phone interview. “The Air Force has validated that fact.”

...

Translation: "We have placed the Boeing data in a Powerpoint file, added the 'EADS Proprietary' disclaimer and the 'Tanker Lessons Learnt' heading, and have surreptitiously leaked it to numerous aviation bloggers around the world. Was that wrong?"

Boeing Co. asked the U.S. Air Force for details on how data on its bid to build an aerial refueling tanker was handled by competitor European Aeronautic Defence & Space Co., after the military mistakenly sent information from each company to its rival.

...

“As we said, and the Air Force has affirmed, the moment we knew we had the data in error, we secured it and contacted the Air Force,” Guy Hicks, a spokesman for EADS, said in a phone interview. “The Air Force has validated that fact.”

...

Translation: "We have placed the Boeing data in a Powerpoint file, added the 'EADS Proprietary' disclaimer and the 'Tanker Lessons Learnt' heading, and have surreptitiously leaked it to numerous aviation bloggers around the world. Was that wrong?"

Thompson said Boeing executives concluded last week - after getting a look at the Air Force's technical analysis of the two competing planes - that they were beaten.

The Air Force sent the confidential analysis, known as an Integrated Fleet Aerial Refueling Assessment, to each of the companies in mid-November. But it mistakenly included a disk containing the Boeing analysis in the package shipped to EADS, and vice versa.

Both companies acknowledged that they received the errant disks and said they notified the Air Force as soon as they became aware of the mistake.

The Air Force called the mix-up a "clerical error" and said it took steps to ensure that neither side was put at a disadvantage. One of those steps, according to the Air Force, was to release the Boeing analysis to EADS and the EADS analysis to Boeing.

"We gave both competitors equal access to the information," Air Force spokesman Col. Les Kodlick said. "We view that as leveling the playing field."

Thompson, who has advocated for Boeing in the tanker contest, said Friday that he spoke to Boeing officials close to the competition. He said that, after reviewing the data, they concluded that EADS held a substantial edge in the Air Force's assessment.

"Basically they saw how they stacked up in the warfighting effectiveness analysis, and they did not stack up well," Thompson said. "The Air Force continues to favor the larger plane" offered by EADS.

Now wait and see what happens next,...., still think this one will be going to Boeing in the end.

Boeing’s actual offer came in lower than its competitor by more than 1%, or at least about $330 million, says Michael Donley, secretary of the air force.

That allowed the air force’s evaluation team to bypass a set of 96 non-mandatory requirements that would only have been triggered if there was less than a 1% differential between the two bids, Donley says.

WASHINGTON, March 4 (Reuters) - Airbus parent EADS conceded defeat in an epic, decade-long contest to sell aerial tankers to the Pentagon and confirmed it would not protest the award of a $30 billion contract to Boeing Co .

EADS North America Chairman Ralph Crosby expressed disappointment after Boeing won the contract on the third attempt, but said the U.S. company had undercut the bid to use European Airbus aircraft by a total of $2 billion.

"It's clear the there is no foundation for protest," he said, adding that the Air Force had followed the ground rules.

EADS confirmed its decision at a news conference after Reuters reported on Thursday that it was poised to waive its right to appeal the contract for 179 planes, turning its focus to other weapons contracts and acquisitions. [ID:nN0395930]

The move may ease transatlantic tensions over defense contracts but is likely to dismay lawmakers in Alabama where EADS planned to assemble its fleet.

For Boeing, the move marks a double victory -- keeping its 767 production line running for a decade longer, and blocking Airbus from establishing a commercial airplane manufacturing site in the United States on the back of the tanker deal.

EADS shares closed earlier down 0.4 percent. Boeing was down down 1.28 percent at $70.43 after making big gains on Thursday.

The Pentagon awarded the hotly contested contract to Boeing last week, calling it the "clear winner" in a competition that Alabama Senator Jeff Sessions said had devolved into a "low price shootout." [ID:nN24261868]

Air Force officials had said EADS was entitled to protest if it believed errors were made, but that the Pentagon expected to prevail in any protest. [ID:nN02254951]

The EADS move paves the way for Boeing to begin work in earnest on an initial $3.5 billion development contract for the first 18 planes that it signed with the Air Force last week.

Defense analyst Loren Thompson said the news was almost all good for Boeing, allowing it to hold on to a core franchise and keeping its main rival out of the U.S. market.

But he said Boeing would be under intense pressure to perform under the very aggressive bid it submitted.

EADS said its own analysis showed that Boeing's proposed price was $21.4 billion against its own offer of 23.4 billion, making the EADS proposal more than 9 percent more expensive.

Boeing was not immediately available for comment.

The Pentagon plans to stage separate competitions in coming years for another 300-plus refueling planes, which provide fuel to fighter jets and other warplanes in mid-flight, extending the range of military operations.